Summary
Microsoft announced price increases for Microsoft 365 and Office 365 subscriptions on 4 December 2025, effective 1 July 2026. E3 rises 8.3%, E5 rises 5.3%. But these increases land on top of the Enterprise Agreement volume discount removal that took effect in November 2025. For large enterprises, the combined impact is not 8%. It is closer to 20%.
A 25,000-user organisation on Microsoft 365 E5 that previously enjoyed Level D volume discounts faces an effective annual increase of approximately $3 million. The price increase and discount removal compound, and most organisations will not negotiate their way back to previous discount levels.
Key points:
Microsoft 365 E3 increases from $36 to $39 per user per month (+8.3%), E5 from $57 to $60 (+5.3%)
Frontline worker SKUs face the steepest increases: F1 up 33%, F3 up 25%
Combined with EA volume discount removal, large enterprises face 15-23% effective increases depending on their previous discount level
Microsoft is bundling Defender for Office 365 P1 into E3, Security Copilot allocation into E5, and additional Intune features across both editions
Renewals completed before 1 July 2026 lock in current pricing for the full term
How Much Are Microsoft 365 Prices Going Up?
Microsoft’s official announcement on 4 December 2025 confirmed the following commercial pricing changes, effective 1 July 2026:
SKU | Current Price | New Price | Increase |
|---|---|---|---|
Microsoft 365 E3 | $36/user/month | $39/user/month | +8.3% |
Microsoft 365 E5 | $57/user/month | $60/user/month | +5.3% |
Office 365 E3 | $23/user/month | $26/user/month | +13% |
Office 365 E1 | $10/user/month | $11/user/month | +10% |
Microsoft 365 F1 | $2.25/user/month | $3/user/month | +33.3% |
Microsoft 365 F3 | $8/user/month | $10/user/month | +25% |
Microsoft 365 Business Basic | $6/user/month | $7/user/month | +16.7% |
Microsoft 365 Business Standard | $12.50/user/month | $14/user/month | +12% |
Microsoft 365 Business Premium remains unchanged at $22 per user per month, confirmed by The Register.
Government SKUs mirror commercial pricing. The Microsoft Tech Community Government Blog confirms that for suites exceeding 10% total increases, the increase will be phased over multiple years with no more than 10% applied annually until the full adjustment is complete.
What Happened to EA Volume Discounts?
The published percentages tell only part of the story. In November 2025, Microsoft removed volume discounts for Enterprise Agreement customers at Levels B, C, and D. Organisations that previously qualified for these discounts now pay list price.
EA Level | Previous Discount | Users Required |
|---|---|---|
Level A | 0% | 500+ |
Level B | ~6% | 2,400+ |
Level C | ~9% | 6,000+ |
Level D | ~12% | 15,000+ |
From November 2025 onwards, all organisations start at Level A pricing regardless of their size. The volume discounts no longer exist. Organisations must now negotiate any discount they receive, rather than qualifying automatically based on user count.
For a large enterprise that previously enjoyed Level D pricing, the effective increase is not the 5.3% or 8.3% in the headline. It is the published increase plus the lost discount, minus whatever they manage to negotiate.
How Much More Will Large Enterprises Pay?
These calculations show the annual cost impact for a 25,000-user organisation under different scenarios. All figures assume annual commitment pricing.
Microsoft 365 E5
Scenario | Annual Cost | Change from Pre-Nov 2025 |
|---|---|---|
Pre-November 2025 (Level D, $57) | $15,048,000 | Baseline |
Post-November 2025 (no discount, $57) | $17,100,000 | +$2,052,000 (+13.6%) |
Post-July 2026 (no discount, $60) | $18,000,000 | +$2,952,000 (+19.6%) |
An organisation that renewed before November 2025 with Level D pricing paid approximately $15 million annually for 25,000 E5 users. A similar organisation renewing after July 2026 without negotiated discounts pays $18 million. That is nearly $3 million more per year, or approximately 20% higher.
The price increase alone, from $57 to $60, adds $900,000 annually for 25,000 users. The discount removal adds another $2 million. The total impact far exceeds what either change would suggest in isolation.
Microsoft 365 E3
Scenario | Annual Cost | Change from Pre-Nov 2025 |
|---|---|---|
Pre-November 2025 (Level D, $36) | $9,504,000 | Baseline |
Post-November 2025 (no discount, $36) | $10,800,000 | +$1,296,000 (+13.6%) |
Post-July 2026 (no discount, $39) | $11,700,000 | +$2,196,000 (+23.1%) |
E3 customers face a steeper percentage increase because the 8.3% price rise is larger than E5’s 5.3%. A 25,000-user E3 organisation with former Level D discounts sees costs rise from $9.5 million to $11.7 million, an increase of approximately $2.2 million or 23%.
Microsoft 365 F3 (Frontline Workers)
Scenario | Annual Cost | Change from Pre-Nov 2025 |
|---|---|---|
Pre-November 2025 (Level D, $8) | $2,112,000 | Baseline |
Post-November 2025 (no discount, $8) | $2,400,000 | +$288,000 (+13.6%) |
Post-July 2026 (no discount, $10) | $3,000,000 | +$888,000 (+42.0%) |
Frontline worker SKUs face the most severe combined impact. The 25% price increase on F3 stacks with the discount removal to produce an effective increase exceeding 40% for organisations that previously held Level D pricing. A retailer, hospital network, or manufacturing company with 25,000 frontline workers on F3 sees annual costs rise from $2.1 million to $3 million. Few organisations license F3 for their entire workforce; frontline SKUs typically cover deskless workers alongside E3 or E5 for knowledge workers.
Industries with large deskless workforces, including retail, hospitality, manufacturing, and healthcare, will feel this disproportionately.
Does Unified Support Cost Increase Too?
There is another cost that increases automatically when licensing costs rise. Unified Support is priced as a percentage of an organisation’s Microsoft licensing spend. When that underlying spend increases by 15-20%, Unified Support costs increase by the same percentage.
Unified Support is priced as a percentage of Microsoft licensing spend. When licence costs increase, Unified Support costs increase by the same percentage.
Unified Support costs increase proportionally with no corresponding increase in value. A 25,000-user E5 organisation paying $1.5 million annually for Unified Support would see that cost rise by $300,000 or more, simply because the licensing baseline increased. The support offering itself has not changed.
For guidance on negotiating Unified Support costs, the key is understanding that support pricing is negotiable even when the underlying formula is not.
What New Features Are Included in Microsoft 365 E3 and E5?
Microsoft justifies the price increases by pointing to new capabilities being added to E3 and E5 subscriptions, detailed in the Microsoft 365 Blog and Intune Blog.
New in E3 and Office 365 E3
Microsoft Defender for Office 365 Plan 1 is the headline feature. Defender P1 brings Safe Links, which scans URLs at time of click and blocks known malicious destinations, Safe Attachments for sandboxing email attachments to detect malware, plus attack surface reduction, device control, and controlled folder access for ransomware mitigation.
As a standalone product, Defender for Endpoint P1 costs approximately $3 per user per month, so the $3 price increase to E3 effectively bundles the protection at cost. Organisations already purchasing Defender P1 separately will see genuine consolidation, but those who were not planning to purchase endpoint protection are now paying for capabilities they may never deploy.
Intune Enhancements for E3 and E5
Both editions receive Intune enhancements according to the Intune Blog:
Intune Remote Help: Secure remote support with role-based access and audit logging
Intune Advanced Analytics: AI-powered anomaly detection and device health monitoring
Intune Plan 2: Tunnel for Mobile Application Management (per-app VPN without full enrollment), specialty device management for AR/VR headsets and meeting room systems, and firmware updates for Zebra devices
E5 Exclusives
E5 subscribers receive everything above plus:
Intune Endpoint Privilege Management: Least-privilege access with elevated permissions only for approved applications
Microsoft Cloud PKI: Certificate lifecycle management, reducing reliance on on-premises infrastructure
Intune Enterprise Application Management: A curated catalogue of 1,000+ pre-packaged applications
Security Copilot allocation: 400 Security Compute Units per 1,000 users per month, capped at 10,000 SCU per tenant
The Security Copilot bundling deserves particular attention. According to Microsoft Learn documentation, E5 tenants receive 400 SCU per 1,000 paid users per month, with a maximum of 10,000 SCU regardless of tenant size. There is no rollover of unused capacity. Overage pricing is $6 per SCU on a pay-as-you-go basis, compared to $4 per SCU for provisioned capacity.
Security teams actively using the tool for incident investigation will likely exhaust 400 SCU quickly, at which point they face a choice between provisioned capacity at $4 per SCU or pay-as-you-go overage at $6 per SCU.
URL Protection for E1 and Business Plans
Office 365 E1, Business Basic, and Business Standard receive URL checks, which is basic Safe Links protection that scans links at time of click. The Microsoft 365 Blog describes this as a subset of Safe Links functionality rather than the full Defender for Office 365 P1 feature set.
Rollout Timeline
According to the Intune Blog, rollout begins in calendar Q3 2026 (July through September). Organisations receive 30 days notice via Message Center before the features become available in their tenant. Eligible tenants are provisioned automatically; no action is required.
Do the Bundled Features Justify the Price Increase?
Organisations already buying Defender P1 or Security Copilot separately will consolidate spend. Those running CrowdStrike, SentinelOne, or another endpoint vendor have no use for a bundled Microsoft alternative they never asked for. The Intune enhancements help if you are stretching Plan 1’s limits; they are irrelevant if Plan 1 already covers your device management.
The honest answer for most E3 customers is that Microsoft has added security features you did not request and will now charge you for them. E5 customers get a Security Copilot allocation that sounds generous until your security team actually uses it.
Tony Redmond puts it bluntly: “I worry about quality of software, the pace of change, the way that Microsoft relentlessly pushes AI.” He adds: “I’m unsure if any organization can use all the functionality bundled into Microsoft 365. Quantity of updates pushed out in a never-ending stream is no substitute for usefulness or quality.”
How Can I Lock In Current Microsoft 365 Pricing?
The most concrete action available is timing your renewal strategically.
Renewal Timing | Pricing Applied |
|---|---|
Before 1 July 2026 | Current pricing for entire term |
After 1 July 2026 | New pricing at renewal |
Mid-term SKU addition after 1 July 2026 | May trigger new pricing for new SKUs |
An organisation renewing a three-year Enterprise Agreement or Microsoft Customer Agreement before July 2026 locks in current pricing through 2029. The discount removal has already occurred, so you cannot recover Level B through D pricing, but you can avoid the July 2026 list price increase.
Here is what we recommend: |
|---|
🟢 Start negotiations 12-18 months before renewal. If you are renewing in late 2026 or 2027, the conversation should already be underway. Microsoft’s fiscal year ends in June, which can create negotiation leverage in Q4 (April through June). 🟢 Model financial impact using both current and July 2026 pricing. Understand exactly what each scenario costs your organisation. The calculations above provide a starting framework, but your specific SKU mix, user counts, and add-ons will differ. 🟢 Conduct a licensing health check. Identify unused licences, users on higher SKUs than they need, and opportunities to consolidate or downgrade. Every seat you eliminate or optimise before renewal compounds over the agreement term. 🟢 Benchmark alternatives. Price out Cloud Solution Provider (CSP) options and understand the trade-offs. At minimum, having an alternative on paper shows Microsoft you are willing to consider other paths. 🟢 Negotiate first, then lock in. Do not let urgency override preparation. A rushed renewal that locks in current pricing but leaves money on the table in discount negotiations may cost more than a well-negotiated renewal at higher list prices. |
What’s the Compound Effect on My Enterprise Agreement?
The July 2026 price increase is not an isolated event. It follows a series of changes that began in late 2025:
Event | Date | Impact |
|---|---|---|
EA volume discount removal takes effect | November 2025 | +6-12% for Levels B-D |
SharePoint/OneDrive standalone retirement | June 2026 | Forces some organisations to full M365 suites |
M365/O365 price increases take effect | July 2026 | +5-33% depending on SKU |
Organisations that also rely on Power Apps, Power BI, or other platform components face parallel pricing changes that compound the total Microsoft spend increase.
How Much Will Microsoft Make From the Price Increase?
At roughly $2 average increase across Microsoft’s 450 million commercial M365 seats, the price changes could add over $10 billion annually to Microsoft’s revenue.
Microsoft claims to have “released more than 1,100 features across Microsoft 365, Security, Copilot, and SharePoint” in the past year. The Register characterises Microsoft as having “got a taste for price hikes” following the 2022 increases.
The 2022 price increase was, according to Microsoft, the first significant increase in a decade. As The Register puts it, Microsoft will not “wait for another ten years” before the next one.
How Do I Calculate My Microsoft 365 Cost Impact?
The specific impact on your organisation depends on your current SKU mix, user counts, previous discount levels, and renewal timing. Use these questions to guide your analysis:
What is your current blended discount across all Microsoft products? If you renewed before November 2025, your current agreement reflects discounts that will not automatically carry forward.
When does your current agreement expire? Early renewal before July 2026 locks in current list pricing but requires giving up remaining term flexibility.
What add-ons are you purchasing separately that overlap with bundled capabilities? If you are buying Defender P1 or Security Copilot independently, the bundling may reduce your total cost despite the higher per-user price.
How many frontline workers do you have on F1 or F3? The percentage impact on frontline SKUs far exceeds knowledge worker SKUs.
What is your Unified Support baseline? Support costs increase automatically when licensing costs rise.
Are you using all the licences you are paying for? Licence optimisation before renewal amplifies savings across the agreement term.
If you need help modelling the impact of the July 2026 price increases on your specific environment or want support with EA renewal negotiations, get in touch. We do not sell Microsoft licences or cloud services, so our advice is independent.